OM v MN

OM (Plaintiff) PARTIES : MN (Defendant/Applicant) Protective Commissioner (Respondent)

COUNSEL : T Boyd (Defendant/Applicant) S Balafoutis (Respondent)

SOLICITORS : David Hooper (Defendant/Applicant) Office of the Protective Commissioner (Respondent)

• 9 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROTECTIVE LIST

1 HIS HONOUR: This is an application for revocation of an order which was made on 9 January 2001 that the estate of the applicant, MN, be placed under management and committed for management to the Protective Commissioner. The application for revocation is made under s 35 of the Protected Estates Act 1983. So that there is no unnecessary suspense, I say now, that, although it is a difficult case, I have come to the conclusion that an order for revocation should be made and I will now shortly explain my reasons for that. 2 MN was seriously injured in a motor vehicle accident on 29 March 1989. He suffered injuries of a major nature, including brain injury. He brought a claim for damages for personal injuries and obtained a settlement approved by the court for the sum of $1,959,637.00. As a result of that award of damages, there is a preclusion period up to 21 March 2023 during which MN is ineligible for Social Security payments. The fund, currently in the hands of the Protective Commissioner, comprises assets of a total value of, approximately, $1,600,000.00. Of that amount, the sum of $444,000.00 has been invested in the house where MN lives with his wife and four children at Bass Hill. The other assets in the estate comprise an investment property at Georges Hall worth about $480,000.00, some motor vehicles of unknown value, and for the most part assets held by the Office of the Protective Commissioner in various managed accounts, spread between cash, fixed interest, listed property trusts, Australian shares and international shares. In other words, the fund is invested in a balanced portfolio. 3 The investment property was purchased with the agreement of the Office of the Protective Commissioner and originally leased to the brother of MN for a rent somewhat less than the true market rent. That, however, was to assist this particular brother, and the arrangement did not last for such a period of time that I consider that the low return is something that should be considered of any significance in this case. 4 There can be no doubt that at the time of the accident and at the time of the settlement MN was seriously injured, and it is accepted that his recovery from his injuries, particularly his brain injury, has been unexpected. Dr Phillips, who is a well-known psychiatrist, examined him in connection with the original proceedings and he has examined him since and he was surprised at the extent of his recovery. Nevertheless, the evidence is that as a result of the injuries, and perhaps to some extent as a result of the original intellectual capacity of MN, it is accepted that there is a reasonably significant cognitive deficiency and there is at least some suggestion of frontal lobe damage. The evidence of Mr Peter Rawling, who is a clinical neuropsychologist, which has not been challenged in any way, is that MN is functionally illiterate, which has the effect that he would have great difficulty in understanding complex or abstract concepts and that his thinking would be what might be described as of a somewhat concrete nature. 5 There is really little difference between the medical evidence called on either side. So far as MN is concerned, the evidence supporting his case came from the neuropsychologist Nicola Gates, whose view was that MN would be able to organise and manage his financial affairs because he had a systematic approach to life and a methodical approach to this. Dr Klug, a forensic psychiatrist, who I thought was an excellent witness, was of the same view. When asked whether or not he considered that there was any risk of outside influence in persons putting pressure on MN to his disadvantage he said that he did not think that there was, that MN appeared to have managed well and taken great care with the funds which were available to him, even though he accepted that there were cognitive problems, particularly with reading and writing. In his report he thought that it would be helpful if members of the family could assist MN, but that, I think, is the position with most people or all people who have a fund of something like $2 million at their disposal, because family assistance would always be of help. 6 The experts whose reports were put in evidence by the Protective Commissioner were really in agreement with Miss Gates and Dr Klug, except that they considered, because of the low intellectual capacity of MN compared with a substantial proportion of the population, that he was vulnerable to exploitation and errors of judgment. Their view was that while a revocation order might be justified because of the good record of the applicant during the time he has had some money available to him, it would be desirable if there be some test period during which he was given more control over his assets just to make sure that he was capable of doing it without a risk and without people putting pressure on him. 7 Dr Phillips, like Dr Klug, was a very careful witness and generally speaking I accept what both of them say. The only question is whether the court should come to the view that there is a risk which should prevent a revocation order being made, the onus being on the applicant to show that he is capable of managing his affairs. 8 There is no purpose in setting out the law in any detail. The requirements have been set out in PY v RJS (1982) 2 NSWLR 700, and in Re GHI (2005) 221 ALR 589, and the principle has been followed in all the cases in this court dealing with the question of revocation. If a revocation is to be made then the applicant for revocation, who bears the onus, must show that he is capable of dealing in a reasonably competent way with the ordinary affairs of man and that he is not likely to be disadvantaged in the conduct of his affairs by being susceptible to persons who might put pressure on him. The ordinary affairs of man does not just mean going down to the local shop and buying ordinary household goods, it means being able to manage ordinary household funds and ordinary investments and it does involve the ability not only to understand that advice ought to be obtained for the investment of a large amount of money but to be able to properly consider that advice. 9 There are some facts in this matter which have caused some concern and there are some matters which support the application made here. There can be no doubt that the applicant has shown a desire to go forward in life. He has, so far as it has been possible for him to do so, been in reasonably regular employment, although he has had to change jobs from time to time. He has been able to maintain his wife and his four children. He has, partly to overcome his problems when he was unemployed for a time, set up a lawn mowing business which he still operates at weekends although he is presently in permanent employment. He has been able to save moneys from his employment income and from moneys made available to him each week by the protective office and he has placed those moneys in safe bank accounts with the intention, so he said, of being able to use them to buy property in the future. There is no suggestion that he has dissipated any of the moneys which have been made available to him. 10 There are some matters, on the other hand, which cause some concern. On their own none of them would be really significant. The question to be considered is whether as a whole they would require the court to come to the conclusion that the applicant is not capable of managing his affairs. 11 Some of those matters are, first ,the lawn mowing business. In his favour he has registered a business name with an ABN number and he has been keeping what appear to be proper records of his income from that business showing a methodical mind. However, he has been collecting from his customers GST of 10 per cent on the amounts which they would otherwise pay to him but he is not registered for GST. Neither he nor, I think, his advisers have understood this, but I do accept his evidence that he thinks this would be a matter for his accountant to set right in the long run, presumably at the end of the year. However, it does show some inability to manage affairs because presently he is keeping those moneys without any right to receive them and without having registered so as to have some requirement to hand them on. 12 Second, in his ordinary tax affairs the applicant has not returned his full income. What should have been done was that the Protective Commissioner should have been responsible for his taxation returns: the difficulty really has been that, as far as I can see from the evidence, returns have been put in by the applicant showing only his work income and not his investment income. It is not at all clear to me whether or not he actually signed these returns or whether they were just filed by electronic filing, but what is clear is that he obtained a refund which he ought not to have obtained and has been required to bring to account for. 13 Thirdly, there is a question of his action in what I think was an intentional misleading of the Protective Commissioner in an application to increase his weekly allowance from $500 to $1,000. The reason that the application was misleading was that MN did not need that increase for the things which he said it was required for. What he wanted it for was so that he could get the additional $500 under his control and invest it in his name. I have had some concerns about this because misleading conduct with one's manager does not necessarily encourage the court to put the financial affairs of the person whose affairs are under management back under his control. 14 The fourth matter to which there has been some attention given in the case is the question of the leasing of the investment property. I said during the hearing that I was not concerned about the lower rent charged to his brother, but I have had some concern about the applicant, who apparently completed the leases or brought about their completion with a term which is stated to be "long-term" or, so far as the present lease to his cousin is concerned, for what is a proper rent at the time but is a fixed rent for a term of three years. That in itself must cast some doubt about capacity, because as far as I could understand from the evidence of MN he thought it was possible to increase the rent if he thought that was a good idea. 15 What MN wants to do is to get control of his moneys and invest them, or at least a substantial part of them, in a real estate investment property. He really has two desires. The first is to obtain a bigger house for himself and his family. He says, and I accept this evidence, that the present house has substantial defects. His intention would be to fix them up, to sell that property and to buy a bigger property, probably as a result of this desire requiring an additional $200,000 from his funds. In addition he wants to buy a further investment property for a sum of about $400,000, and on the evidence that would leave him with a figure of between $100,000 and $150,000 which he says he would put in a bank account so as to have funds available for emergencies. 16 The protective office prepared an investment plan for his funds, as it currently does, and it has reviewed that plan, I think on one occasion. The applicant also, it seems at the suggestion of his solicitor, sought advice from a Mr Greaves, a financial planner. All the advisers suggested a spread of assets and did not suggest that the whole or the major part of the fund should be invested in real estate investments. The applicant, while he has listened to that advice, is not prepared to take it. He honestly said this, and that, I think, is to his credit. He considers that real estate investments are a safer form of investment and that is how he wishes to see his money invested. That is one of the reasons why he wishes to have the management order revoked. He had at an earlier stage asked the protective office to invest $1 million in an investment property of four flats and that was refused. 17 In these matters the question is, of course, not whether a person takes all the advice given to him but whether he is prepared and able to consider that advice and then come to a reasonable decision. It is, I think, difficult for a man such as this to give any proper consideration to a financial plan put forward in the terms which it appears the law requires these plans to have. What was put forward by Mr Greaves was in essence a plan to put $750,000 into what might be described an umbrella fund which would then cover various managed funds investments. I am not satisfied that the applicant understood this, but I do understand why he might not. There are a large number of members of the community who, rightly or wrongly, consider that real estate is the safest form of investment. The applicant did say that he would be prepared to discuss this matter further with Mr Greaves and I accept that, but nevertheless I proceed on the basis that he is fixed with his intention of investing in real estate. 18 What I have said, I think, without going to the medical evidence in detail, covers the concerns and the facts relevant to the decision. This is a protective matter and care must be exercised. The experts who, if you like, advocate caution do so because they consider that the applicant, because of his intellectual capacities and cognitive difficulties, is susceptible to outside influence which may bring about loss of his funds. Dr Klug does not think so. 19 Having listened to the applicant and having regard to the careful way in which he has managed his money to date and the considerable amounts of money, which came to approximately $130,000, which he has one way or the other kept under his control until reasonably recently and the fact that there has not been shown to be anything other than care in their management, I have come to the conclusion that the applicant has proved that he is entitled to an order for revocation and I propose to make that order. 20 I wish to say, however, that the Protective Commissioner had every reason to require this decision to be made carefully by the court rather than, as is often the case, accept the position and not put any evidence before the court. This is a matter which was not altogether clear and where the matter in my view has had to be the subject of a reasonably careful balance. Nevertheless, even taking into account the additional care that is required in these matters, which must be relevant to determining whether or not the applicant has proved his right to a revocation order, I have come to the conclusion that he has and I will make that order. 21 I declare that it has been proved to the satisfaction of the court that MN is capable of managing his affairs. I order that the Protective Commissioner be discharged as manager of the estate of MN. 22 I order that the costs of the Protective Commissioner on the indemnity basis be paid out of the estate of MN.

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